This morning I traded the forex market making $350 in 20 minutes, while I am still short half a lot, in case EUR/USD currency pair breaks below the daily S1 pivot point. This trade is a fine example why we need to pay attention to important support and resistance levels and how scaling out our position is an effective way to exit. Trading EUR/USD in the 1-minute forex graph while pinpointing crucial levels at other time frames offered me the chance to short sell at the resistance level, while keeping a tight stop of no more than 10 pips risking $300 having traded with 3 lots. The currency pair eventually drifted towards the support level, but I had already traded out 75% of my initial position by then. I have still half a lot to trade out either at breakeven point, at the initial stop loss or at the daily S2 pivot point.
In forex trading I use 4 graphs for any currency pair. Starting clockwise from top left the image shows the 1-min graph, the 3-min, the hourly and the 15-min graphs. First I sold 300K euros at 1.32845 – pointed out with the red arrow – and set a stop loss at 1.32945. EUR/USD did climb above the resistance level a few pips before it began drifting. Thankfully the stop loss needed 4 more pips climb to be hit. The decline found support initially at 1.32750 where I exited 50% of my trading position, buying 1.5 lot to cover. That trade banked me $150 and I now had 1.5 more lot to exit, while I had secured a profit. I bought back 1 lot at 1.3260 winning 20 pips with 1 lot, which meant $200 more to my trading equity. Those two profitable trades are shown with green arrows on the forex graphs.
As I am writing this post, EUR/USD has pulled back to 1.3270 but I am not looking to exit anywhere inside the trending channel. The pair is currently trending sideways between well defined support and resistance levels. I will either trade out at the initial stop loss level losing $50, or at the breakeven point not willing to lose any money. Of course I might have picked an excellent entry point, if the pair decides to drift below the support level at 1.3250 and I could make more money with that half a lot than the money the 2.5 lots have already made! If EUR/USD decline continues to S2 pivot point at 1.3200, the additional profit will be $425. The final sum of the trade will then be almost $800. However it might not stop there and go all the way down to 1.3100. Having no pressure with secured profits, I have won myself a free trade which would take advantage of such a decline.